* Singapore to announce gold contract launch on Wednesday
* Top gold consumer Asia wants to provide alternative to
* Liquidity could be an issue for Asian contracts
By A. Ananthalakshmi
SINGAPORE, June 24 Singapore is set to announce
the launch of a gold futures contract on Wednesday, two sources
familiar with the matter said, joining a race in Asia to provide
a viable alternative to the metal's global benchmark which is
under regulatory scrutiny.
The physically settled contract will trade on the Singapore
Exchange. This and other planned contracts in Hong
Kong and China could cut Asian reliance on gold's spot price
benchmark in London and futures bellwether in New York.
"Having a local price for local markets ensures that markets
are more efficient and that the price accurately reflects where
the metal is locally trading," said Ruth Crowell, chief
executive of industry group London Bullion Market Association.
"As more markets develop, local prices for precious metals
will become more tailored."
The Singapore Exchange did not respond to phone calls or an
email seeking comment.
The price benchmark for gold is the so-called London 'fix',
determined by a group of four banks over a teleconference. The
process has drawn attention recently, after regulators in Europe
and the United States started to probe benchmarks in several
markets following the Libor manipulation case in 2012.
China and India account for more than half of global gold
consumption but Asia still largely relies on the London fix for
reference. The fix is set twice daily, at 1030 and 1500 London
time - both much after Asian markets close.
Asia's fast-growing consumption of gold in recent years and
ambitions by countries such as China and Singapore to be trading
hubs have led them to explore providing benchmarks. The recent
scrutiny of the London fix and accusations of manipulation have
accelerated the process in Asia.
China, the world's biggest producer and consumer of gold, is
set to launch three physical gold contracts in an upcoming
international exchange in Shanghai's pilot free trade zone. It
is also looking to launch gold derivatives later.
CME Group Inc, the world's No.1 futures exchange,
plans to launch a physically deliverable gold futures contract
in Asia, most likely in Hong Kong, sources familiar with the
matter told Reuters in April.
While the Asian contracts may help set local benchmarks,
their influence in global markets may be quite limited unless
they can garner enough liquidity to match or overtake trading
volumes in London and New York.
CME's COMEX gold contract is the most-traded bullion futures
contract with 2013 volumes nearly four times higher than the
second-biggest gold contract, on the Shanghai Futures Exchange,
according to Thomson Reuters GFMS.
Liquidity in Asia has been a problem, with the Hong Kong
Mercantile Exchange - which used to trade gold and silver
futures - shutting down last year, partly because of low
volumes. Regulators later found suspected irregularities in the
In 2010, the Singapore Exchange launched a gold contract but
later pulled it on weak investor appetite.
"If you need a price discovery function, then COMEX serves
us pretty well," said Yuichi Ikemizu, branch manager for
Standard Bank in Tokyo. "The fact is the liquidity is there and
not in the local exchanges."
China has the best chance among Asian nations of having an
impact on global gold pricing as it already has well-established
physical and futures markets though it still needs to open up
the markets to foreign players, say traders.
"As the Chinese market becomes bigger and it opens up to
foreign players some more, it might end up completing the troika
with London and New York," said one trader in Hong Kong.
(Editing by Muralikumar Anantharaman)